NASDAQ is an acronym that stands for National Association of Securities Dealers Automated Quotation System. This is an electronic exchange that is recognized as today’s fastest growing stock market.The NASDAQ prices stocks and trades them but for many investors it is used as an index which provides a measure of how tech stocks are faring. The NASDAQ records a bigger number of companies and on a daily basis trades a bigger number of shares than any other market in the US. It is the US’s largest equity market, it is electronically traded, and it has so far included 3300 companies.
1How the NASDAQ Exchange Works
The pricing and exchange of stocks at the NASDAQ is reliant on a computer system. Unlike in other exchanges where these activities are carried out on a trading floor, this computer system is able to achieve instant securities quotes.
This exchange is all about the over-the-counter (OTC) stock market and therefore for any trading you carry out here your broker will only need to key in the stock quotes and information for the concerned security on a computer.
He/she will therefore be in a position to know what the best price for the concerned stock is and subsequently complete the transaction.
2NASDAQ Market Makers
The NYSE has particular stock specialist, but NASDAQ market makers compete among themselves to purchase and sell the stocks they decide to represent. All these makers use their own capital, systems and research to represent stocks and to compete against each other. They vie for customers’ orders by presenting buy and sell quotations on an electronic exchange for a specific number of shares at a designated price.
There are four types of market makers:
• Regional market makers
Retail market makers via brokerage networks that have a steady flow of orders and sales openings serve individual investors.
3Characteristics of the Stocks Traded on the NASDAQ
In most cases, the stocks traded on the NASDAQ have minimal liquidity and their price variation is higher. These characteristics make for higher volatility and this tends to limit the number of willing investors. However, this limitation is a profit-making opportunity for seasoned and knowledgeable investors.
The NASDAQ index (represented as QQQQ) is a guide that details the one hundred largest stocks (by market value) traded on the NASDAQ. The index is an excellent alternative to choose instead of going for individual stocks.
4The Best Times to Purchase NASDAQ Stocks
The best times to buy these stocks are when significant price movements or trends are happening. The trade of stocks occurs in a pattern and these patterns can be identified using tools like the 200-day moving average. Both...